I think the success of the Coase Theorem — because it’s discussed all over the place — is an interesting illustration of what’s wrong with economics … I think it’s useful because you can show, using it, the type of contracts that would have to be made in order to have an efficient economic system. But then you have to introduce, having done that, the obstacles to doing it. Then you see how the system actually works. … The article has been very successful for the wrong reasons. To people who like success that’s all right, but to people who are concerned with the development of the subject it’s not a very good thing.

Despite what you might read, Coase’s theorem does not offer theoretical cover for the libertarian position of markets, free markets and nothing but free markets. Rather, it’s a useful steer. It gives you ideas where to look when markets aren’t working.